London -- Three cities in Germany are ranked the top five European markets for commercial real estate investment, according to a report by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC).

Munich took the top spot in the report, “Emerging Trends in Real Estate Europe 2013,” followed by Berlin, London, Istanbul and Hamburg. The ranking of 27 cities across Europe was based on respondents’ expectations for market performance in 2013.

Overall, the highest ranked cities were the larger Western European centers with international appeal and better economic prospects. The worst performing cities were those in countries at the heart of the Eurozone crisis or struggling to cope with the consequences of the 2008 financial meltdown, including Athens, Lisbon, Dublin, Madrid and Barcelona. Budapest came in last in the rankings.

“Almost five years since the start of the financial crisis, real estate investors remain cautious about capital deployment and the availability of debt” said Joe Montgomery, chief executive of ULI Europe. “As a result investors are focusing on the harder to find opportunities in blue-chip cities such as Munich, Berlin, London and Paris, rather than turning to secondary locations in search of higher returns.”

The study noted that Munich’s No. 1 ranking was based on a multiple factors, including its strong and liquid market, expanding demographics and low vacancy rates and constrained supply.

Berlin, which is dubbed by many as Europe’s “Silicon Allee,” was called out for its growing reputation as a technology hub and reputation as a cultural center.

The report called London “one of the world’s ultimate safe havens,” and that it is seen as sitting apart from the problems in the wider United Kingdom and European economies. The city’s size, strength and liquidity of its real estate market are attractive to many investors. Istanbul was cited for its future development opportunity.

“The city’s exciting real estate potential is driven by economic growth which rivals China and demographics where the average age in Turkey is only 29,” the report noted. “Recent changes have eased restrictions on foreign ownership of Turkish real estate, as the government seeks to attract international capital and transform Istanbul into a regional financial centre.”

Investor interest in Hamburg, Germany’s second largest city, is driven by its safe-haven status. The city benefits from a diverse mix of global occupiers and domestic small and medium sized businesses, according to the report.